The Bloomberg reports that RBI Governor Sanjay Malhotra has indicated that a rise in retail fuel prices may be unavoidable if global crude oil prices remain elevated due to the continuing conflict in West Asia.
Speaking at the 12th High-Level Conference on the International Monetary System, organised jointly by the International Monetary Fund and the Swiss National Bank, Malhotra said the Indian government has so far absorbed much of the pressure caused by higher international oil prices, with petrol and diesel prices at the pump remaining largely unchanged despite a sharp rise in crude prices.
He noted that the government had also reduced duties and allowed only limited increases in some regulated prices, including gas. However, the RBI Governor indicated that such measures may not continue for an extended period if the crisis persists. In his own words: "If this is to continue for a longer period of time, it is just a matter of time before the government will pass on some of the price increases."
Malhotra's remarks align with signals from other senior officials. Union Petroleum Minister Hardeep Singh Puri had, a day earlier, indicated that a prolonged West Asia crisis could force the government to pass on the pressure to domestic consumers, as oil marketing companies continue to absorb losses from holding petrol, diesel, and LPG prices firm. Puri also stated that petrol, diesel and LPG stocks in the country are adequate, and that oil companies have increased LPG production to 55,000–56,000 tonnes from around 35,000 tonnes earlier to ensure uninterrupted supply. He added that India currently holds crude stocks equivalent to around 76 days of demand.
Tensions around the Strait of Hormuz have affected global energy shipments, driving India's crude import costs higher and placing pressure on inflation, the rupee, and the broader economy. Supply-chain disruptions caused by the blockade of the Strait of Hormuz are beginning to hit India and lead to higher inflation. Media reports suggest that oil companies are currently losing close to ₹1,000 crore per day, even as petrol and diesel prices for consumers remain unchanged.
India's trade and energy exposure to the region compounds these concerns. Malhotra noted that nearly one-sixth of India's imports come from the Middle East, while a similar share of its exports is directed there. Around 40 per cent of India's remittances and fertiliser imports are connected to the region, along with nearly 60 per cent of the country's gas supplies.
India's consumer price index (CPI) inflation rose to 3.48 per cent in April, up from 3.4 per cent in March, signalling the first round of price pressures in the wake of the Middle East crisis. On the government's fiscal position, Malhotra highlighted that the fiscal deficit, which had risen to 9.2 per cent of GDP during the pandemic, has now been reduced to nearly 4.3 per cent as part of the ongoing fiscal consolidation process.
On monetary policy, the RBI's Monetary Policy Committee unanimously decided in its April 2026 meeting to keep the repo rate unchanged at 5.25%, maintaining a neutral stance — reflecting a "wait and watch" strategy to balance strong domestic growth while monitoring inflation amid global uncertainties. Malhotra said the RBI is prepared to look through the shock if it proves transitory, but added that "if it is entrenched, we need to take action," noting that flexible inflation targeting frameworks may not be sufficient in times of large supply shocks, and that fiscal coordination becomes critical. The central bank's next monetary policy meeting is scheduled for June 5.
The government has also moved on the broader import front. Import duty on gold and silver has been raised from 6 per cent to 15 per cent, effective May 13, while duty on platinum has been increased from 6.4 per cent to 15.4 per cent — measures expected to support the rupee and help narrow India's widening current account deficit. Prime Minister Narendra Modi has also urged citizens to cut down on petrol and diesel use, defer gold purchases, and avoid foreign travel in order to preserve foreign exchange reserves.